Partnership registration requires genuine partners and true profit shares; a name-lender in the deed can justify refusal.

Registration under section 26A was available only if the firm was constituted by a valid partnership instrument reflecting the true shares of the real partners. The Income-tax Officer could examine whether the alleged partners were genuine and whether the deed and application disclosed the actual state of affairs. Where a shown partner was only a name-lender or had no beneficial interest in the stated share, the statutory requirements were not met and registration could be refused. On the facts stated, refusal of registration was justified and the answer was against the assessee.

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Issues: Whether the firm was entitled to registration under section 26A of the Indian Income-tax Act when one of the alleged partners was found not to be a genuine partner and the shares shown in the deed did not reflect the true position.

Analysis: Registration under section 26A is a statutory privilege and is available only when the firm is constituted by a valid instrument of partnership specifying the individual shares of the real partners. The application and accompanying particulars must disclose the true state of affairs, and the Income-tax Officer is entitled to examine whether the partnership is genuine, whether the persons described as partners are in fact real partners, and whether the shares stated are the actual shares. If the deed or application shows a partner who is merely a name-lender or who has no beneficial interest in the share entered in the instrument, the officer may refuse registration because the requirements of the statute and rules are not satisfied.

Conclusion: The refusal to register the firm was justified, and the answer to the referred question was against the assessee and in favour of the Revenue.

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